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Common questions

What is a limited liability company?

A limited liability company, or LLC, is a business entity created under state law that combines characteristics of both a corporation and a partnership. Like a corporation, the owners of an LLC are generally not personally liable for company debts. Like a sole proprietorship or a partnership, an LLC is, by default, a "pass through" entity for tax purposes. This means that the LLC does not pay taxes on its profits, but instead, profits and losses are "passed through" to the owners, who must then pay tax on their share of LLC income.

How does a corporation protect my personal assets?

If a business operates as a corporation, the business owners, called shareholders, are not personally liable for debts or other claims against the corporation. That's because the corporation is a separate legal entity from its owners. If a corporation complies with the formalities required for it to be treated as a separate legal entity, then anyone seeking to collect a debt from, or enforce a claim against, a corporation, would not be able to collect from the shareholders themselves. They would only be able to pursue the assets held in the name of the corporation.

What is the difference between a C corporation and an S corporation?

The IRS allows corporations to choose to be taxed as either a "C corporation" or an "S corporation." Income from C corporations are subject to double taxation; that is, the corporation pays taxes on its net income and then the shareholders also pay taxes on the income that they receive from the corporation. S corporations have only one level of taxation. The shareholders still have to pay taxes on money that they receive from the corporation, but an S corporation does not pay taxes on its net income. While the S corporation is popular among small business owners, C corporations have greater tax planning flexibility and can shield shareholders from direct tax liability.

Do I need a name or DBA for my business?

You only need a DBA ("doing business as") if you are operating a sole proprietorship or partnership and you want to use a fictitious name for the business. You don't need a DBA for an LLC or a corporation unless you are using a name other than your LLC or corporate name while doing business.

Do I need any other licenses or permits to start my business?

Some cities, counties, and states require businesses to obtain licenses and permits to operate. We can help you figure out what you need. Learn more.

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Helpful information

An introduction to limited liability companies

What is a limited liability company (LLC)? What function does it serve? And is it right for your needs? Read full article

An introduction to corporations

It's no coincidence that the largest businesses in the world are corporations. Incorporating offers many advantages over partnerships,sole proprietorships, and LLCs. Read full article

The advantages and disadvantages of an LLC

Before forming a limited liability company, the prospective business owner should become familiar with how an LLC compares to other business entities. Read full article

Reasons to Form a Nonprofit Corporation

State-recognized nonprofits are eligible to receive private and public grants, exemption from sales and property tax, and more. Read full article

Start a Business with LegalZoom – Form an LLC, Corporation, Partnership, or Sole Proprietorship

Choosing a business structure is an important step in starting a business because it determines how your business will operate as well as how it will be taxed. Whether you choose a limited liability company (LLC), corporation, sole proprietorship, or partnership LegalZoom can help you get started. LegalZoom makes it possible to form an LLC, corporation, nonprofit, sole proprietorship, limited partnership, or limited liability partnership online quickly and easily. The process begins with answering a few questions about your new business. LegalZoom will create your business entity documents and file them with the appropriate state agency, and you'll receive your completed package by mail. LegalZoom helps with the administrative aspects of business formation allowing you to focus on the details of your business that matter to you the most. Whether you're interested in forming an online business or a brick and mortar business, LegalZoom has the resources you need for starting a small business.

*A nonprofit corporation doesn't have an owner, stock, or membership interest, but it can have multiple managers and members.

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